Dynamic regulation of quality

Stéphane Auray, Thomas Mariotti and Fabien Moizeau
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Thomas Mariotti: GREMAQ - Groupe de recherche en économie mathématique et quantitative - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique

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Abstract: We develop a dynamic regulation model of quality provision where maintenance efforts and quality shocks have a durable impact. When the regulator contracts with a sequence of agents, asymmetric information can lead to overprovision of quality, reflecting a dynamic rent extraction effect. When the regulator contracts with a single agent, the efficiency of their relationship depends on the regulator's ability to transfer rents across periods. Hiring a single agent with unlimited liability is socially preferable to hiring a sequence of agents, even when no commitment is feasible. By contrast, shorter franchises are socially preferable if the agent has limited liability.

Keywords: quality; dynamic regulation (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (6)

Published in The RAND Journal of Economics, 2011, 42 (2), pp.246-265. ⟨10.1111/j.1756-2171.2011.00132.x/pdf⟩

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Related works:
Journal Article: Dynamic regulation of quality (2011)
Working Paper: Dynamic Regulation of Quality (2008)
Working Paper: Dynamic Regulation of Quality (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00607190

DOI: 10.1111/j.1756-2171.2011.00132.x/pdf

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